Global custodian BNP Paribas Securities Services is leaving the door open to becoming an international central securities depository (ICSD) in the future.
The new European settlement platform, Target2-Securities (T2S), set to launch in 2015 by the European Central Bank, has caused custodians to look into becoming CSDs.
BNY Mellon is the first to take the leap, with the signing of the T2S Framework Agreement in May, a contract governing the legal relationship between the relevant central bank and the CSD. There are reports that JP Morgan will follow suit.
Philippe Ruault, head of product for clearing and custody services at BNP Paribas Securities Services, said becoming an ICSD could be an option, but the future was uncertain.
“The strength of ICSDs is that they are really active on Eurobonds and the fixed income market, plus they have tri-party programmes,” he said.
“We have a different profile. We are more equity focused. But then nothing is closed and we are looking at all options.”
Ruault said BNP Paribas was keeping an eye on the CSD space, but he believed there were currently too many in the market and consolidation may happen.
“At the moment, we don’t see any reason to add a new CSD in a T2S environment,” he said.
T2S was created to simplify and harmonise settlements in across European borders, providing a common IT platform and standards for all transactions.
There are currently 23 CSDs signed up to connect to the new platform in four waves, spanning from 22 June 2015 to 6 February 2017.
Banks are given the option to connect to T2S directly, in agreement with their CSD, using two companies picked by the European Central Bank – finance messaging provider SWIFT and a consortium composed of service providers SIA and Colt.
BNP Paribas Securities today announced it had picked SWIFT’s value added network solution.
“As a major securities services provider, we will connect directly to T2S to reap its benefits and pass them on to our clients,” Alain Pochet, head of clearing, custody and corporate trust services for BNP Paribas Security Services, said.
“We will therefore build our services for the T2S environment on the strongest foundations. We are confident that SWIFT’s T2S connectivity solution is the best choice for us and our customers.”